Which of the Following Are False About the Interest-Rate Sensitivity

question 22

Multiple Choice

Which of the following are false about the interest-rate sensitivity of bonds
I. Bond prices and yields are inversely related.
II. Prices of long-term bonds tend to be more sensitive to interest-rate changes than prices of short-term bonds.
III. Interest-rate risk is directly related to the bond's coupon rate.
IV. The sensitivity of a bond's price to a change in its yield to maturity is inversely related to the yield to maturity at which the bond is currently selling.

• A)I
• B)III
• C)I, II, and IV
• D)II, III, and IV
• E)I, II, III, and IV

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Definitions:

Likelihood of Breakdown

The probability or chance that a system or component will fail to perform its intended function.

Component Reliability

A measure of the likelihood that a component will perform its required function under specified conditions for a certain period without failure.

Low-Intensity Bulbs

Light bulbs that emit a lower level of brightness compared to standard lighting options, often used to save energy.

FR(%)

An abbreviation possibly referring to Financial Ratio or Failure Rate, both of which quantify different business or operational metrics.